Equity Futures: Sustenance above 15700 by Nifty 50 key for recovery

Informist, Thursday, May 19, 2022

By Vaibhavi

MUMBAI – Today, the Nifty 50 erased most of the gains it had clocked earlier this week, as recession fears triggered a sharp sell-off across global markets.

The Nifty 50 touched a low of 15775.20 points today, eventually ending 2.7% lower at 15809.40 points. 

Despite the steep fall today, market participants have not lost all hope, and believe that a recovery for the index may still be on the cards.

A reversal is possible if the Nifty 50 can sustain above its March low of 15700 points, said Sneha Seth, a technical and derivatives analyst at Angel One. 

Nonetheless, as the Nifty 50 retraced below its crucial support of 16000 points, the support base has shifted lower, which was seen in the positioning of put options.

Put option traders unwounded their positions at the 16000 strike price and shifted lower to the 15700 and 15800 strike prices, as these levels now act as crucial support zones, Seth said.

Premiums across put options of 15000-15800 strike prices also skyrocketed amid the risk-off sentiment in the market.

Strong buying across put options lifted volatility gauge India VIX, which shot up nearly 13% to a high of 25.1475 points. The index ended over 10% higher at 24.5575 points.

Call option writers turned active across the 16000-16200 strike prices, as the contracts witnessed maximum change in open interest.

In case of a rebound, the index is expected to face immediate resistance at 16000-16200 points, an analyst said.

Short positions got added to the May futures contract of Nifty 50, as open interest surged 14.5% to 9.6 mln. 

The weak market sentiment also put banks under pressure. As a result, the Nifty Bank index slipped 2.5% to end at 33315.65 points.

Going forward, analysts expect the Nifty Bank index to move in tandem with the headline index.

Similar to the Nifty 50, the support base for the sectoral index has also shifted lower, as traders turned active at the 33000 strike price put options, which led to a surge in its premium.

Sustenance above its key support of 33000 points is crucial for Nifty Bank, as a fall below that will trigger a further downside towards 32100-32200 points, said Ajit Mishra, vice-president, research at Religare Broking.

In case of an upside, the index is expected to face resistance at around 34000 points, analysts said. This view was reaffirmed by call options data, as the 34000 strike price contract witnessed maximum addition of long positions.

The fall in Nifty Bank was also triggered by an increase in selling positions, as open interest in its May futures contract rose nearly 3% to 2.4 mln.

–Nifty 50 May ended at 15784.00, down 442.05 points; 25.40-point discount to spot index

–Nifty 50 Jun ended at 15785.35, down 445.05 points; 24.05-point discount to spot index

–Nifty 50 Jul ended at 15818.00, down 441.95 points; 8.60-point premium to spot index

The total turnover in the futures and options segment of the National Stock Exchange was 174.8 trln rupees compared with 113.1 trln rupees on Wednesday.

The turnover in index options was 171.3 trln rupees compared with 109.6 trln rupees during the previous session. The total premium turnover of the index and stock options was 432.0 bln rupees compared with 430.9 bln rupees on Wednesday.

The most-actively traded underlying stocks were Adani Ports and Special Economic Zone, ITC, Reliance Industries, HDFC Bank, Infosys, ICICI Bank, Tata Consultancy Services, Dr Reddy’s Laboratories, Tata Motors and Tata Steel.

End

Edited by Namrata Rao

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Source: Cogencis